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Jones Group in talks to sell jeanswear division

by Richard Collings  |  Published October 12, 2011 at 12:35 PM
Jones Group Inc. announced Tuesday that it is in discussions to sell its jeanswear division to listed Israel-based Delta Galil Industries Ltd. for between $350 million and $400 million as the apparel conglomerate looks to focus on its more profitable business lines.

If the transaction is successful, Jones Group said it would consider using a majority of the proceeds to buy back shares. The New York-based company expects talks to either conclude or terminate within a month. Delta Galil is led by Isaac Dabah, the CEO of Gloria Vanderbilt Jeans from 1993 to 2003, until the brand was sold to Jones Group. Investors cheered the news, sending Jones Group shares up 10% to $10.88 in midmorning trade, giving the company a market capitalization of around $940 million. The sale would include the Gloria Vanderbilt brand as well as licenses to other brands related to the jeanswear business.

The competitive jeans business has long had narrow profit margins and has recently been hit by higher cotton prices and increased labor costs.

Delta Galil said in a release that an agreement is subject to negotiations with Israeli and U.S. banks regarding financing of the deal. Contrary to reports, mezzanine financing will not be utilized, the company said. When Gloria Vanderbilt Jeans was sold to Jones Group, Dabah became head of Jones Group's denim division.

In August 2005 GMM Capital LLC, Dabah's private equity firm, acquired Sara Lee Corp.'s 23% stake in Delta Galil for about $27.7 million.

Delta Galil on June 28 announced it would acquire KN Karen Neuburger, a line of sleepwear and home products, from Russell Newman Inc. Delta Galil projected that KN Karen Neuburger would post sales of around $20 million in 2012.

Delta Galil traded Tuesday morning at $4.65 a share, with a market capitalization of $108 million.
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